The New Jersey Health Care Facilities Financing Authority tomorrow will head to market with $150 million of state-backed, fixed-rate bonds that will help finance the consolidation of acute-care services in northern New Jersey.
This will be the authority's third Hospital Asset Transformation Program deal, in which the state agrees to guarantee the debt if the bond sale will facilitate the closing of an acute-care center to help lower the state's high number of vacant hospital beds. The HCFFA then receives monthly payments from the hospital borrowers to reimburse the state for debt service costs.
Proceeds will refinance prior debt of JFK Medical Center in Edison and Muhlenberg Regional Medical Center in Plainfield, which ended its acute-care services in August. Solaris Health System owns the two facilities.
Goldman, Sachs & Co. tomorrow will hold a one-day retail order period followed by institutional pricing on Thursday. McManimon & Scotland LLC is bond counsel. Officials do not anticipate using insurance on the deal, according to Mark Hopkins, the HCFFA's executive director.
Like prior hospital asset transformation sales, the rating agencies assigned to the debt ratings one notch below New Jersey's general obligation credit rating. Standard & Poor's and Moody's Investors Service rate the Series 2009A bonds AA-minus and A1, respectively. Fitch Ratings assigns an A-plus.
The Series 2009A bonds include serial maturities from 2013 to 2019 and two term bonds in 2024, for $40.3 million, and 2031, for $73 million, according to the preliminary official statement.
The authority has been working on the deal since last year, but a combination of weak market conditions and finalizing the structure of the bonds kept it from issuing the debt.
Along with the refinancings, roughly $22 million of bond proceeds will help support capital improvements and expansion projects at JFK Medical Center to absorb the increase of emergency-care business from Muhlenberg, which is 5.5 miles northwest of the JFK facility.
Another $6.5 million will pay down an outstanding line of credit with Wachovia Bank NA that helped Solaris begin work on needed improvements to JFK Medical Center.
The transaction will refinance $17.2 million of Series 2000 MRMC bonds, and various JFK bonds including Series 1993 for $11.7 million, Series 1995 for $20.6 million, Series 1998 bonds for $41.5 million, Series 2003 for $15.2 million, and Series 2005 for $18 million. The Series 2000 MRMC bonds and the 1998 JFK bonds are rated below investment grade.
Elsewhere in the state, St. Mary's Hospital in northeastern New Jersey is working on a reorganization plan after filing chapter 11 bankruptcy on March 9.
St. Mary's was the first health care provider to borrow from the authority under the transformation program when the HCFFA sold $45.4 million of state-contract bonds on April 11, 2007, on the hospital's behalf. Since the bankruptcy filing, St. Mary's has not paid the authority the payments that total $308,000 per month, on average, according to the authority. The state's next debt service payment on the bonds is Sept. 1, according to the deal's official statement.
Hopkins said whether St. Mary's will begin submitting its monthly payments again depends upon the bankruptcy proceedings.
"The purpose of the program is to try to keep a hospital operating when it's stuck with stranded debt of a hospital closure," he said. "So by its nature it means there's some risk involved and that's why the state steps in in the way it does."